PPR sees strong year as sales grow

NadyaMasidlover

PARIS--PPR SA (PP.FR), the owner of luxury brand Gucci, Thursday said it expects to perform better this year than last, as it reported a rise in first-half profit, fueled by buoyant business in its luxury goods division.

"We are confident that we will be able to continue growing our revenue in the second half of 2012 and that our full-year financial performance will outstrip that of 2011," said PPR Chief Executive Francois-Henri Pinault.

The holding company has over the past decade sharpened its focus on luxury and lifestyle brands to cash in on stellar growth in a sector that has appeared resistant to the economic downturn. Earlier Thursday, it announced plans to sell its stake in African distribution company CFAO SA (CFAO.FR), a former unit of the company that was spun off in 2009.

The company's upbeat tone may help to allay fears about the sustainability of the luxury boom, which had been raised by signs of an economic slowdown in China.

Net profit in the first half rose 5.9% from a year earlier to 476.9 million euros ($586.7 million), slightly higher than analysts' expectations of EUR473.2 million euros.

Sales jumped 17% on a proforma basis--which strips out contributions from its Redcats catalogue business and Fnac retail unit in Italy, which are up for sale--to EUR6.39 billion, beating analysts' forecasts.

Sales in the luxury division, home to the company's cornerstone Gucci brand as well as Bottega Veneta and Balenciaga, increased 18% on a like-for-like basis--excluding currency effects and asset sales or acquisitions-- with on-year sales growth maintaining a strong pace in both the first and second quarters, up 18% and 17%, respectively.

The company's sports and lifestyle arm, which includes Puma AG (PUM.XE), put in a weaker performance, with sales up 4% to EUR1.69 billion. Last week, the German sportswear maker warned that its profit would be lower than expected despite high-profile sporting events like the London Olympics, and said it will accelerate its cost-cutting program to reduce the pressure on its margins.

The company's strong growth in luxury will be looked upon by investors as a sign that surging demand for luxury goods may be holding up.

At 1524 GMT, PPR shares were up 4.0% at EUR112.90, on a 3.7% higher CAC-40 index.

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